U.S. companies evaluate risks of underwriting carriers; access to Mexican motor vehicle data and financial information is an issue; meanwhile, political wrangling on both sides of the border is keeping Mexican trucks in neutral

The key is in the ignition, but so far, Mexican trucks are not moving down U.S. highways. One reason is companies must weigh risks before they offer insurance to Mexican carriers — and so far, it’s a murky profit picture.

Under NAFTA, Mexican carriers must be insured by a U.S.-approved company to operate here. But most U.S. firms have no prior experience assessing risks associated with Mexican long haulers operating on U.S. roads. Federal officials told Land Line no company is currently certified to offer the insurance.

Part of the reason is only about 200 Mexican carriers have sought U.S. approval to make long-haul trips inside the United States. That isn’t a large enough base to spread the risk, analysts say. Moreover, other factors, such as lack of access to Mexican motor vehicle records and financial information, concern analysts.

“This is a new situation and a new marketplace, and the infrastructure is not yet in place in Mexico that U.S. underwriters are used to,” said David Golden, director of commercial lines for the National Association of Independent Insurers. About one-third of NAII’s 750 members offer commercial insurance.

Todd Spencer, executive vice president of the Owner-Operator Independent Drivers Association, said, “At this time, we don’t know of any dependable companies that are writing insurance beyond the commercial zone. Say a Mexican truck has an accident in the U.S. While it may have obtained insurance somewhere, how reputable is the company? Will the policy pay off?”

Access to data

Mexico recently built a state-of-the-art database that currently holds more than 200,000 commercial driver vehicle records, including accident and violation information. But, says Golden, it could take more than a year for thousands of other drivers to renew their CDLs and get on the system.

Another factor, Golden said, is lack of access to financial information. Unlike Mexico, the United States has developed a sophisticated system for obtaining financial information in a usable format.

“For Mexican carriers, U.S. insurers will have to shift gears and get used to evaluating raw financial data. Right now, not many insurance companies will jump into a situation like that,” Golden said. “But as time goes by and more carriers go north, more insurance companies may want to insure Mexican carriers. It will be a business decision.”

Mexican privacy bills could restrict access

Meanwhile, two privacy bills before the Mexican legislature appear to limit U.S. companies from gaining access to Mexican motor vehicle records.

Manuel Calderon, vice president of Mexico’s Insurance and Finance Commission, told the National Association of Insurance Commissioners in December concerns about the bills were misguided. He said the proposals would actually broaden access to information, not restrict it.

“We are encouraged by Mr. Calderon’s assessment of these privacy bills,” Golden said. “Our concerns are that the access to motor vehicle records by American insurance company underwriters might be inhibited, making it difficult to offer coverage to Mexican motor carriers that seek entry into the United States.”

Meanwhile, Golden asked a NAIC subcommittee to study the bills and clarify their effect should either become law.

“We have come a long way in the last few years to find ways to provide insurance support for cross-border trucking. Now that the transportation issues seem to be worked out, it would be a shame to see those efforts thwarted because insurers cannot access critical safety information on foreign drivers,” Golden said in a letter to the NAIC.

While these details are being worked out, “fly-by-night” insurance border operations remain a concern.

In fact, the Federal Motor Carrier Safety Administration (FMCSA) recently issued a warning on its Web site, reminding carriers and truckers that insurance companies in Texas, New Mexico, California and Arizona must be licensed in the United States.

“Regulators and law enforcement are now looking for criminals who would take advantage of drivers going in both directions,” Golden said. “The FMCSA has told me they are already on that issue, so these operations won’t last long.”

On-site inspections

Political sensibilities also cloud the Mexican truck issue. The Mexican government is annoyed by a NAFTA requirement calling for on-site inspections of Mexican trucks in Mexico by U.S. regulators. Mexican labor groups, which have supported President Vicente Fox, believe this requirement unfair.

American trucks have on-site inspections before getting permanent authority to operate, while Mexican motor carriers are required to have on-site inspections before they can get provisional authority, the first level of authority to operate.

As many as 62 applications are delayed because of the inability of the U.S. Department of Transportation to enter Mexico and make on-site inspections, press reports say.

“This matter must be worked out between the two governments, and we are hopeful that this issue will be resolved quickly,” Golden said.

Meanwhile, Mexican labor and transportation officials have threatened to bar U.S. trucks from Mexico until the inspection issue is resolved.

Another sore spot: Canadian drivers can get into the United States without speaking English, but Mexican drivers will not be able to do so.

OOIDA: Security is the ‘big issue’

Meanwhile, Spencer says, the big issue — often overlooked when it comes to the Mexican truck issue — is security.

“Call this free trade or whatever,” he said. “The reality is, given the events of 9/11, it is more than a little troubling that our southern border, long the preferred path for illegal drug trade, could now be a path for much more.”

Spencer said NAFTA likely will bring about evolutionary, rather than revolutionary change.

“But over time, you can be sure there will be more trucks doing business here as Mexican motor carriers develop business contacts, or, as the case may be, businesses here develop them,” he said.

Spencer also is concerned about the government’s ability to make sure Mexican trucks are not violating cabotage and registration rules. The U.S. Customs Service and the Immigration and Naturalization Service (INS) are responsible for the development and enforcement of cabotage restrictions as they relate to U.S. surface transportation.

However, “While the Federal Motor Carrier Safety Administration has directed all states to adopt laws that would give their enforcement officials the authority to place a truck from Mexico out of service for not being properly registered,” he says, “it’s unlikely that more than one or two states have actually done that.”

U.S. labor’s angry reaction

On Nov. 27, the Bush administration announced plans to issue cross-border licenses.

But by mid-December, Bush said he would not issue Mexican truck permits for at least a month in response to a lawsuit filed by a coalition of labor and environmental groups opposed to allowing Mexican truckers to operate on U.S. highways.

Teamsters Union President James Hoffa said Dec. 17 that Bush’s Nov. 27 decision “has placed the future of homeland security and public health in the hands of exploited and poorly trained Mexican drivers.”

He added: “Free trade is nothing more than snake oil when two countries don’t apply the same set of rules, and tens of thousands of American workers will pay the price.”

In response to the suit, the Ninth Circuit Court on Jan. 16 ordered the Department of Transportation to prepare an environmental impact statement and Clean Air Act conformity determination before Mexican trucks can travel beyond U.S. commercial zones.

In its ruling, the court found DOT “acted arbitrarily and capriciously” by failing to prepare a full environmental statement.

“The (Department of Transportation) ignored the National Environmental Policy Act,” Hoffa said before the decision came down. “With no meaningful facts to back it up, the agency found ‘no significant impact’ and insisted that opening the border would not harm the environment.”

“In addition, there is no system in place to systematically inspect the emissions of trucks coming over the border from Mexico,” he added.

Audits

The federal government also has other steps to take before it can issue permits, including conducting an audit of each carrier (which does not include emissions inspections) and publishing a 10-day notice of its intent to issue permits, Al Meyerhoff, who is representing the coalition, said.

“We have a respite from the immediate threat of an influx of trucks,” Jonathan Weissglass, an attorney for the petitioners, said.

“The American people — especially those living along trucking routes — can breathe a temporary sigh of relief,” he said.

The plaintiffs have argued that Mexican trucks will increase pollution because they don’t have to meet U.S. emissions standards.

The same groups in May sued the department in U.S. District Court, claiming the Bush administration failed to assess the environmental effect of allowing Mexican trucks throughout the United States.

NAFTA and Mexican trucks

Some facts

Under President Bush’s Nov. 27 ruling, Mexican motor carriers can bring only international goods into the United States from outside the country. After the truck makes the delivery, its options are to return to Mexico empty or to load a product bound for Mexico.

However, a Mexican truck could drop off its goods in Minneapolis and travel to Atlanta to pick up another load, provided the cargo in Atlanta is destined for Mexico. But the Mexican carrier cannot pick up a domestic load and deliver to another point in the United States before returning to Mexico.

In a Nov. 27 memo to Secretary of Transportation Norman Mineta, President Bush authorized the Department of Transportation to act on applications from Mexican-domiciled motor carriers requesting permission to do business beyond U.S. border commercial zones.

Those who know the trucking industry in Mexico do not see Mexican carriers flocking to the U.S. DOT with applications. So far, about 200 trucking companies — of the thousands operating in Mexico — have applied to U.S. authorities for permits to truck beyond the commercial zones.

“I don’t see in the near future Mexican carriers going into the United States,” Felix Canales, a representative of the customs brokers’ association of Nuevo Laredo, Tamaulipas, recently told Reuters. Canales said there’s not much profit in taking a load of glass to Detroit and going back empty.

Meanwhile, motor carriers domiciled in Mexico operating in the United States will be subject to the same federal and state laws, regulations and procedures that apply to carriers domiciled in the United States.

These include safety regulations, such as drug and alcohol testing requirements; insurance requirements; taxes and fees; and other applicable laws and regulations, including those administered by the U.S. Customs Service, the INS, the Department of Labor, and federal and state environmental agencies.

Bush is calling for the DOT to work closely with the Department of Justice, the Office of Homeland Security and other relevant federal departments, agencies and offices to help ensure the security of the border and to prevent potential threats to national security.